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Surface Transportation Board Rules Norfolk Southern Transloading Facility is Exempt from Most State and Local Laws

On February 17, the Surface Transportation Board (STB) ruled that the Norfolk Southern ethanol transloading facility is engaged in rail operations and is therefore protected by federal preemption from most local regulation. The City had argued that transloading was not covered by federal preemption and that Norfolk Southern should have applied for a special use permit before opening the facility.

On June 17, 2008, Alexandria petitioned the STB for a declaratory order, which was granted on November 5, 2008. The action instituted a proceeding to determine whether the operation of an ethanol transloading facility constitutes transportation by rail carrier and, therefore, is covered by the federal preemption provision. The summary of the results of this proceeding is as follows:

First, the STB found that Norfolk Southern's ownership of the facility, along with its payments for construction of improvements, were important. Second, the STB found that Norfolk Southern's relationship with RSI (the contractor that actually performs the transloading from rail cars to tanker trucks) did not give RSI control of the transloading business. The STB placed particular reliance on the fact that RSI is paid a fee by Norfolk Southern for services while RSI does not pay a lease or license fee to Norfolk Southern. Norfolk Southern, not RSI, collects fees from and markets the facility to shippers of ethanol.

Most of these facts were not known to the City when the initial petition to the STB was filed, as Norfolk Southern refused the City's early requests to share operational information that was ultimately relied upon by the STB, including Norfolk Southern’s contract with RSI. It is only because of this case, along with the haul route litigation that is still pending in federal district court, that any of this material was exposed.